Weaker than expected US economic fundamentals is setting the stage for the next gold bull market, according to exchange-traded fund provider Van Eck Global.

Following strong performance of the gold price at the start of 2016, investors have increased their holdings of physical gold through ETPs by almost 27% this year, as of the end of May 2016.

Reporting through its monthly Gold Market Commentary, Van Eck notes that expectations of interest rate hikes by the Federal Reserve decreased significantly in the wake of employment results considerably below consensus. Reduced probabilities of rate increases (derived from the federal funds futures market) tend to affect gold pricing by signalling lower expected future profitability of the economy and stock market, thereby changing the relative attractiveness of risk-on versus risk-off assets.

As Van Eck notes: “The gold market moved to the beat of the Federal Reserve’s rate hike drumming in May. On May 18, the market interpreted the minutes from the Federal Open Market Committee April meeting as being more hawkish than anticipated and market expectations of rate increases in June and July jumped to 32% and 47%, respectively. Gold traded down for nine consecutive sessions following the release of the minutes.”

On 3 June however, following the release of the May jobs report by the US Department of Labour which announced an increase of just 38,000 workers compared to Bloomberg’s median forecast of 160,000, the implied probability of June and July rate increases dropped from 20% and 53.6% to 4% and 29% respectively. Gold rallied 2.8%, closing at $1,244 per ounce on 3 June. Indeed, on Wednesday 15 June 2016 at the end of their two day meeting, the Federal Reserve announced they would not be raising rates this month.

Van Eck’s commentary argues the surprise jobs report represents another important inflection point for gold that suggests the early stages of a new bull market. The firm writes: “The gold price has been consolidating in the $1,200 to $1,300 per ounce range since early March, hitting a low of nearly $1,200 per ounce on May 30. It now appears as if gold is poised to remain above the technically and psychologically important $1,200 per ounce level. While it is not uncommon for the gold price to struggle in the summer months, we believe gold is forming a new base. We expect to see higher gold prices as the year progresses.”

Investors of gold bullion ETPs appear to have a similar conviction, having increased their net holdings of physical gold by 4.8% during May. Holdings of global gold ETPs have increased almost 27% this year to an estimated 59.5 million ounces of gold.

Turning to gold stocks, Van Eck notes that the significant increase in the gold price during 2016 (as of 14 June 2016, the spot price of gold is up 21.0% year-to-date, at $1,284 per ounce) has placed gold mining companies in a fundamentally stronger position. The firm writes: “For firms currently building new mines, the higher cash flows provide welcomed cushions and remove market concerns over financing. Most companies also expect dividends to resume and/or increase as free cash flow grows. But for most companies, higher cash flows, at a time when balance sheets are in good shape and costs are under control, will likely bring back the opportunity to add future growth.”

While financially stronger positions are likely to lead to greater exploration activity, after speaking with the management of approximately 20 gold companies during May, Van Eck observed a desire for caution when pursuing growth. Managers stated their preference for metrics such as free cash flow per share rather than sheer production volumes when measuring growth, highlighting favourable approaches that keep the end investor in mind. Van Eck believes this bodes well for the long-term performance of the industry and has stated that valuations remain relatively low, possible offering a value opportunity.

Investors can gain access to gold equities through the VanEck Vectors Gold Miners UCITS ETF (LSE: GDX), which provides exposure to gold producers with market capitalizations greater than $750m, and the VanEck Vectors Junior Gold Miners UCITS ETF (LSE: GDXJ) which provides targeted exposure to the small-cap miner segment of the market. The funds track the NYSE Arca Gold Miners Index and the MVIS Global Junior Gold Miners Index which are up 65% and 76% respectively between the start of the year and 31 May 2016. The total expense ratios (TER) of GDX and GDXJ are 0.52% and 0.56% respectively.

For US investors, Van Eck has listed similar non-UCITS-compliant funds on the NYSE Arca. Also listed in the US, the Sprott Gold Miners ETF (NYSE: SGDM) and the Sprott Junior Gold Miners ETF (NYSE: SGDJ) provide similar exposure to the Van Eck gold miner ETFs. Each Sprott ETF has a TER of 0.57%. Investors looking for leveraged exposure to the industry may consider the Direxion Daily Gold Miners Bull 3X Shares (NYSE Arca: NUGT) which provides US investors with triple the daily performance of an index of globally-listed mid- to large-cap gold mining companies. The TER of the fund is 0.95%.

There are several ways investors can get direct exposure to gold. In Europe the ETFS Physical Gold ETP (PHAU) is offered by ETF Securities and has over $5bn in assets. It is physically backed by gold held in a vault in London and has a TER of 0.39%.

In the US the SPDR Gold Shares ETF (GLD) tracks the spot price of gold and costs 0.40%. It is physically backed and has asset of over $36bn.